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CMA Foundation · Fundamentals of Financial and Cost Accounting · Adjustment Entries and Rectification of Errors

Furniture purchased for Rs 12,000 was wrongly debited to Purchases Account. The correct rectifying journal entry is:

Debit Furniture Account and credit Purchases Account by Rs 12,000. The asset was wrongly charged to Purchases, so the amount must be moved from Purchases to Furniture. This is a two-account error and needs no Suspense Account.

  1. APurchases A/c Dr 12,000 to Furniture A/c 12,000
  2. BFurniture A/c Dr 12,000 to Purchases A/c 12,000Correct
  3. CFurniture A/c Dr 12,000 to Suspense A/c 12,000
  4. DFurniture A/c Dr 12,000 to Cash A/c 12,000

Explanation

The debit went to Purchases instead of Furniture, an error of principle (capital treated as revenue). To correct, debit Furniture and credit Purchases by Rs 12,000. Option A reverses the entry, doubling the error.

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